American Airlines' Unions to Vote Again

Published 8:00 pm, Monday, April 21, 2003

A second major union at American Airlines said Monday its members would vote again on a pay-cut package designed to keep the carrier from bankruptcy.

The decision by the transport workers union came in response to an executive bonus and pension plan that has riled labor relations at the beleaguered airline.

American's chairman and chief executive, Donald J. Carty, repeated his apologies from last week about the perks, which were revealed after the airline's three main unions agreed to $1.8 billion in annual concessions.

"I made a mistake, and of course it was a big one," Carty said at a news conference.

The transport workers union said late Monday on its Web site that it would have a new vote. Late Friday, the Association of Professional Flight Attendants announced that its members would reconsider their $340 million share of the wage and benefit cuts American has said it needs to avoid bankruptcy.

The labor unrest prompted investors to sell shares of AMR Corp., American Airlines' parent, down 23 percent Monday on the New York Stock Exchange. AMR shares fell $1.15 to close at $3.85. The shares jumped 52 percent last week, as American edged back from the brink of bankruptcy.

Some experts in labor law said the union could have valid cause for conducting a new election because the company did not disclose bonuses and payments to a pension trust for top executives while it negotiated with unions for pay and benefit cuts.

The bonuses were rescinded, but the company won't try to recover the undisclosed amount it paid to fund the pensions for 45 top executives.

A spokesman for the flight attendants union said members were just as upset Monday as they were when they learned of the executive perks late last week.

"The fact that we're re-balloting has really helped," said the union spokesman, George Price. "They did feel as though they were duped by the company, and now they feel they can make a fully informed decision."

The union at first rejected the concessions but reversed itself after voting was extended by a day, which the union blamed on technological glitches in the voting process. In the end, 52.7 percent of flight attendants who voted approved the concessions, fearing that bankruptcy would lead to even deeper wage and benefit cuts.

In public, American has acted as if the flight attendants' election is settled in the airline's favor. Company officials say they have a ratified contract with the union that takes effect May 1 and have declined further comment on the subject.

Some labor-law experts, however, say the unions could have legal grounds to challenge the election.

Charles Craver, a professor of labor law at The George Washington University, said unions have wide latitude in conducting ratification votes. He added that the company could be guilty of bargaining in bad faith if union negotiators asked about executive compensation and were not told of the bonuses and pension payments.

David L. Gregory, a labor-law professor at St. John's University, said American could be guilty of bad-faith bargaining by threatening unions with bankruptcy unless they approved concessions. He added that American might have interfered in the flight attendants' voting by contacting union members on the last day _ a complaint raised by the union.

"There is a very solid basis for this vote to be challenged," Gregory said.

Even if American's actions were legal, the scholars said, they put the company in a bad light just when it appeared to have avoided bankruptcy.

"The American executives have put their entire corporation at risk," Craver said.

Before the AMR board's decision in October, executive pensions were paid out of company general funds and would have been unsecured in bankruptcy, said Bruce Hicks, the American spokesman.

Hicks said the company was not considering rescinding the pension payments, which were made to protect the benefits in case the airline filed for bankruptcy, as are the pensions of other employees. AMR also won't ask executives to return money from a trust.

Fort Worth-based AMR is scheduled to report first-quarter earnings Wednesday, and analysts predict it will post an $800 million loss.